The Great Divergence

[Jester]

Wealth and income for the richest people is mostly 'virtual'. It's money created by money, by means of trading in stocks, shares, debts, and even more exotic financial constructions. While phantom money does have a relation to 'real' money (cash and commodities), the total value of it has far outgrown the things it once represented, for the past decaces. Since accumulation of phantom wealth mostly befalls those who already have the most, this would greatly contribute to the current divergence.

I agree with you - wealth makes wealth, and as instruments for transforming today's capital into tomorrow's riches become more and more sophisticated, the productivity of capital increases relative to labour, increasing inequality between workers and owners. The more esoteric the instruments, the harder it is for the "little guy" to participate in those kinds of ownership.

As a small nit, however, money is not "real," at least not in its modern form. Money (the national bank note) is just the most basic financial instrument, a promise of value. It is different only in its simplicity from the more complex derivatives, options, mortgages, securities, bonds, and other "phantom" financial ideas. You still can't eat it.

-Jester